Business taxes a heavy burden in Tennessee

Tennessee is in the bottom half of a new study that measures the tax burden businesses would face in each of the 50 states.

The Tax Foundation study released today ranks states based on the tax liability for both mature and new businesses. Tennessee is 29th in both categories, which means it has a heavier tax burden than most of the country.

“Corporate taxes on the state level rarely treat all comers equally, leading to sometimes dramatic disparities in the cost of doing business,” Tax Foundation president Scott Hodge said in a news release. “Tax preferences and incentive deals can distort the playing field based on how long a business has been operating, whether it’s a manufacturing or retail operation or whether it’s moved from another state to set up shop.”

Tennessee is at a competitive disadvantage compared to many of its  neighbors. Georgia has the most favorable business tax environment among southeastern states, ranking 3rd for mature businesses and 6th for new businesses.

A couple of others: Kentucky ranks 7th for new businesses and 18th for mature businesses. North Carolina, 7th for mature businesses and 13th for new businesses.

The study also looked at the tax burden for seven different types of business – corporate headquarters, research and development facility, retail store, call center, distribution center, capital-intensive manufacturing,and labor-intensive manufacturing.

Tennessee’s best rankings are 17th for new distribution centers and 19th for mature business centers.

New research and development centers face the highest tax burden in the state, according to the study. Tennessee ranks 44th in this category.

“The main cause for this ranking is the state’s sourcing rules for services – which expose 100 percent of the operation’s income to state taxes – and the nation’s highest sales taxes for this type of firm,” the study says.

The ten states with the most favorable business tax burdens are in Wyoming, which ranked first, followed by South Dakota, Georgia, Nevada, and Ohio.

States with the highest tax burdens are Pennsylvania, which ranked 50th, followed by Hawaii, West Virginia, Kansas, and Rhode Island.

Here’s a link to the complete Tax Foundation report:

Location Matters: A Comparative Analysis of State Tax Costs on Business

The Tax Foundation is based in Washington, D.C. and describes itself as a nonpartisan tax research group. It was founded in 1937, making it the oldest think tank in the country.